Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Jackson Lalic Lawyers Pty Limited v Attwells [2014] NSWCA 335
• Hearing dates: 23 July 2014
• Decision date: 01 October 2014
• Before: Bathurst CJ at [1]; Meagher JA at [49]; Ward JA at [50]

Decision

(1)Grant the applicant leave to appeal.

(2)Direct the applicant to file a notice of appeal in the form of the draft amended notice of appeal contained in the application book amended to seek orders setting aside the orders of the primary judge made on 17 October 2013.

(3)Order that the separate question of whether the plaintiffs' claim is defeated entirely, because the defendants are immune from suit be answered as follows: The advocate's immunity from suit is a complete answer to the claim made by the plaintiffs.

(4)Order that judgment be entered for the applicant in the proceedings.

(5)Order the respondents pay the applicant's costs of the proceedings in this Court and the Court below but have a certificate under the Suitors' Fund Act 1951 (NSW) if eligible.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: PROCEDURE - civil - separate question - whether matter ripe for determination, were facts agreed and breach clearly defined; TORTS - negligence - defences - advocates' immunity - scope - whether advice intimately connected with conduct of proceedings - advice led to settlement of proceedings by way of consent order
• Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56-58; Suitors' Fund Act 1951 (NSW); Uniform Civil Procedure Rules 2005 (NSW), r 28.2
• Cases Cited: Adam P Brown Male Fashions Proprietary Limited v Philip Morris Incorporated (1981) 148 CLR 170; Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85; Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585; Bass v Permanent Trustee Company Limited [1999] HCA 9; (1999) 198 CLR 334; Biggar v McLeod [1978] 2 NZLR 9; Bott v Carter [2012] NSWCA 89; Carl Zeiss Stiftung v Herbert Smith & Co [1969] 1 Ch 93; CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601; Chamberlain v Ormsby t/as Ormsby Flower [2005] NSWCA 454; D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1; Donellan v Watson (1990) 21 NSWLR 335; Donnellan v Woodland [2012] NSWCA 433; Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543; Landsal Pty Ltd (In liquidation) v REI Building Society, now the Co-operative Building Society of South Australia [1993] FCA 121; (1993) 41 FCR 421; MacRae v Stevens (1996) Aust Torts Reports 81-405; Rees v Sinclair [1974] 1 NZLR 180; Saif Ali v Sydney Mitchell & Co [1980] AC 198; Symonds v Vass [2009] NSWCA 139; (2009) 257 ALR 689
• Category: Principal judgment
• Parties: Jackson Lalic Lawyers Pty Limited (Applicant); Gregory Ian Attwells (First respondent); Noel Bruce Attwells (Second respondent)
• Representation: Counsel: Dr A S Bell SC/ P Silver (Applicant); J C Kelly SC/ G M Colman (Respondents); Solicitors: Sparke Helmore (Applicant); Whites Layers (Respondents)
• File Number(s): 2013/341556

Decision under appeal

• Citation: [2013] NSWSC 1510
• Date of Decision: 2013-10-10 00:00:00
• Before: Harrison J
• File Number(s): 2011/185796

HEADNOTE

[This headnote is not to be read as part of the judgment]

The applicant appealed against a decision of Harrison J (the primary judge) declining to answer, by way of separate question, whether the advocates' immunity from suit was a complete answer to the respondents' negligence claim against the applicant (the negligence proceedings).

The negligence proceedings arose out of (allegedly negligent) advice the applicant gave when representing the respondents in proceedings where a guarantee was sought to be enforced against them (the guarantee proceedings). The advice led to the settlement of the guarantee proceedings by way of consent order.

At the hearing of the separate question a statement of agreed facts clearly defining the negligent breach of duty to the respondents in the guarantee proceedings was before the primary judge.

The Court held (Bathurst CJ, Meagher and Ward JJA agreeing), granting leave to appeal and upholding the appeal:

(1) That the primary judge erred in declining to answer the separate question as the reasons given by the primary judge to refuse to answer the separate question were irrelevant and in circumstances where the alleged breach was clearly defined and agreed upon it was appropriate to answer the separate question: [29] and [30] (Bathurst CJ), [49] (Meagher JA) and [50] (Ward JA).

CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 and D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 applied. Symonds v Vass [2009] NSWCA 139; (2009) 257 ALR 689 and Bott v Carter [2012] NSWCA 89 considered.

(2) The advice did fall within the scope of the advocates' immunity as it led to the guarantee proceedings being settled and was therefore intimately connected with the guarantee proceedings: [37] and [38] (Bathurst CJ), [49] (Meagher JA) and [50] (Ward JA).

D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 and Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 applied. Bott v Carter [2012] NSWCA 89 and Donellan v Watson (1990) 21 NSWLR 335 considered. MacRae v Stevens (1996) Aust Torts Reports 81-405 and Saif Ali v Sydney Mitchell & Co [1980] AC 19 distinguished.

(3) The negligence proceedings would involve re-agitation of the issues in the guarantee proceedings and therefore would offend the principle of finality: [41] (Bathurst CJ), [49] (Meagher JA) and [50] (Ward JA).

Judgment

1 BATHURST CJ: This is an application for leave to appeal by an incorporated legal practice, Jackson Lalic Lawyers Pty Limited (the applicant) from a decision of Harrison J (the primary judge). The primary judge declined to answer a separate question relating to the applicant's immunity from suit in proceedings for negligence brought against it by the respondents.

Background

2 The first respondent and Ms Barbara Jane Lord were the guarantors of certain secured advances made by the ANZ Banking Group Limited (the bank) to a company, Wilbidgee Beef Pty Limited (the debtor). The second respondent is the assignee of the rights of the first respondent against the applicant.

3 Ms Lord has not been joined as a party to the proceedings either in this Court or in the Court below. She apparently is bankrupt and her trustee in bankruptcy has indicated they do not wish to join the proceedings or make any submission as to the outcome.

4 Liability under the guarantee was limited to the amount of $1.75 million, although the amount due by the debtor to the bank was considerably in excess of that amount, totalling at the time of the events giving rise to these proceedings some $3.4 million.

5 The debtor defaulted and the bank brought proceedings against the first respondent and Ms Lord under the guarantee (the guarantee proceedings). At the hearing of those proceedings before Rein J, the bank certified that the amount owing by the guarantors, including interest and enforcement costs, was $1,856,122.28. What is alleged to have taken place subsequently is set out in the Amended Statement of Claim in the present proceedings.

"5. Upon opening the hearing of the proceedings before the Supreme Court of New South Wales on 15 June 2010 counsel for the ANZ bank and receivers appointed by that bank ('the receivers') acknowledged in open court and it was the fact that:

a. the claim by the ANZ bank against the first plaintiffs and Lord on the guarantee made the subject of the proceedings was limited;

b. the ANZ bank accepted that the debt due by the first plaintiffs and Lord on the said guarantee was $1.5 million plus interest plus enforcement costs ('the guaranteed debt'); and

c. the amount of the guaranteed debt, as at 15 June 2010, as certified by the ANZ bank, was $1,856,122.28.

[Particulars omitted]

6. At or about 2:30 pm on 15 June 2010:

a. Senior Counsel briefed by the defendant to appear for the first plaintiffs and Lord on the hearing of the proceedings negotiated a settlement of the claim by the ANZ bank and the receivers upon terms that there would be judgment for the ANZ bank for $1,750,000, inclusive of costs, and the first plaintiffs and Lord would have until the end of November 2010 to pay that amount ('the settlement');

b. the Court was informed by the parties that the proceedings had been settled; and

c. the proceedings were adjourned to permit terms of settlement to be prepared and handed up.

Particulars

Shortly after the luncheon adjournment of the proceedings on 15 June 2010, Mr R Harper SC, who appeared for the first plaintiffs and Lord in the proceedings, approached the first plaintiffs and Lord and Mr Faris Shehabi of the defendant, by whom Mr Harper SC had been briefed on behalf of the first plaintiffs and Lord, and said words to the effect, 'I have got you $1,750,000 and November to pay. Is that OK?' whereupon the first plaintiffs and Lord gave instructions to settle the proceedings on that basis. At or about 2:30 pm on that day, the Court was informed that the proceedings had been settled, subject to terms, whereupon the hearing of the proceedings was adjourned by the Court to permit terms of settlement to be prepared and subsequently handed up the next day.

7. During the course of the afternoon of 15 June 2010 draft terms of settlement in the form of a document entitled 'Consent Order' were prepared by the solicitors for the ANZ bank and forwarded to the defendant.

Particulars

The document entitled 'Consent Order' was wholly in writing, prepared in draft by Kemp Strang, solicitors, on behalf of the ANZ bank and, at some time during the afternoon or early evening of 15 June 2010 which is best known to the defendant, was forwarded, either as a whole or in several parts, to Mr Faris Shehabi on behalf of the defendant.

8. Order 1 of the draft Consent Order, in final form, ('the Consent Order'), provided that there would be a verdict and judgment against the first plaintiffs, Lord and the trustee in the sum of $3,399,347.67.

9. Orders 2 to 9 of the Consent order provided, inter alia, that the first plaintiffs and Lord would give possession of a number of mortgage securities, including the farm properties known as 'Wilbidgee' and 'Moora Mora', and certain water rights, (collectively, 'the securities'), to the ANZ bank and its receivers.

10. Order 11 of the Consent Order provided that orders 1 to 9 would not be enforced if the first plaintiffs and Lord paid the ANZ bank the sum of $1,750,000 on or before 19 November 2010.

...

12. At or about 6 7.30 pm on 15 June 2010 the defendant advised the first plaintiffs and Lord that they should sign the Consent Order and consent to a judgment against themselves, in favour of the ANZ bank, in the sum of $3,399,347.67, because, if they defaulted in payment of the sum of $1,750,000 by 19 November 2010, it would not make any difference if the judgment in favour of the bank was for $3,399,347.67 or any other sum ('the advice').

Particulars

The advice was oral and given by Mr Faris Shehabi on behalf of the defendant in conference at the offices of the defendant at or about 6 7.30 pm on 15 June 2010.

13. In breach of the implied term of the retainer and in breach of duty, the defendant was negligent in and about giving the advice.

Particulars of Negligence

a. Advising the first plaintiffs and Lord to consent to a judgment against themselves, in favour of the ANZ bank, in the sum of $3,399,347.67, when the plaintiffs did not have a liability to the ANZ bank for $3,399,347.67 or anything like that sum.

b. Advising the first plaintiffs and Lord to consent to a judgment against themselves, in favour of the ANZ bank, in the sum of $3,399,347.67, when the claims against them in the proceedings, even if wholly upheld against them, would not result in a the first plaintiffs and Lord having a liability to the ANZ bank for $3,399,347.67 or anything like that sum.

c. Advising the first plaintiffs and Lord that, if they defaulted in payment of the sum of $1,750,000 by 19 November 2010, it would not make any difference if the judgment in favour of the bank was for $3,399,347.67.

d. Failing to advise the first plaintiffs and Lord that the effect of the Consent Orders was that, if the first plaintiffs and Lord defaulted in payment of the sum of $1,750,000 by 19 November 2010, there would be a judgment against them for $1,543,225.39 more than the guaranteed amount of $1,856,122.28.

e. Failing to advise the first plaintiffs and Lord that, if they defaulted in payment of the sum of $1,750,000 by 19 November 2010, and the securities were sold by the ANZ bank for a sum in excess of $1,750,000 the ANZ bank would, as a practical matter, be entitled to any excess up to $1,543,225.39 and the first plaintiffs and Lord would be at risk of being bankrupted for any shortfall against the judgment of $3,399,347.67.

f. Failing to advise the first plaintiffs and Lord that the value of the claim against them was not $3,399,347.67 but was limited to judgment in favour of the ANZ bank in the guaranteed sum of $1,856,122.28 plus costs plus the value, if any, of the claim for wrongful detention of the goods made the subject of the proceedings.

g. Failing to advise the first plaintiffs and Lord that no legally binding settlement came into existence unless and until terms of settlement had been signed and, instead of consenting to judgment against them in the sum of $3,399,347.67 and agreeing to the other orders contained in the Consent Order, there were other alternatives they could pursue including making a counter-offer of judgment against them in relation to the guaranteed sum of $1,856,122.28 in lieu of $3,399,347.67 and, failing agreement by the ANZ bank, resuming the hearing.

h. Failing to advise the first plaintiffs and Lord of the advantages and disadvantages of the alternatives that were available to them instead of signing the Consent Order, including making a counter offer and resuming the hearing.

i. Failing to seek the advise of Senior Counsel on the alternatives that were available to the first plaintiffs and Lord in the event that the ANZ bank insisted upon judgment against the first plaintiffs and Lord in the sum of $3,399,347.67.

j. Failing to advise the first plaintiffs and Lord that they should refuse to consent to a judgment against themselves for an amount which they did not owe.

k. Failing to advise the first plaintiffs and Lord that they should refuse to consent to orders on conditions over which they did not have control.

l. Failing to advise the first plaintiffs and Lord that the way the Consent Orders worked, namely, to impose a judgment of $3,399,347.67 upon them in the event that they were unable to refinance or sell the securities before 19 November 2010, was draconian and punitive.

m. Causing the first plaintiffs and Lord to incur a liability that they did not owe.

n. Causing the first plaintiffs and Lord to be harmed in their credit standing and repute by the entry of a judgment against them in the sum of $3,399,347.67.

o. Failing to advise the first plaintiffs and Lord not to sign the Consent Orders.

14. The breach of the implied term and the breach of duty caused the first plaintiffs and Lord to suffer loss and damage."

6 The Defence filed in these proceedings admitted pars [6]-[11] of the Amended Statement of Claim, subject to certain reservations. It admitted that the applicant gave certain advice in respect of the consent order but denied negligence. The applicant also pleaded advocates' immunity from suit.

7 On 10 July 2013, Schmidt J ordered that the question of advocates' immunity from suit be determined separately from the other questions in the proceedings. The parties had joined in making the application for a separate question under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR) and had agreed the matter could be determined on the pleadings.

8 Subsequently the parties agreed on a statement of Agreed Facts for the purpose of the determination of the separate question. The Agreed Facts included the matters set out in pars [6]-[10] and [12]-[14] of the Amended Statement of Claim, including the particulars thereto. The Agreed Facts also noted that the consent order settling the guarantee proceedings was signed on or about 15 June 2010 and submitted to the Court on about 16 June 2010. It also noted that the Court made the consent order on 21 June 2010.

9 The primary judge declined to answer the separate question.

The reasoning of the primary judge

10 The primary judge noted the respondents' submission (repeated in this Court) that as the respondents were only sued for $1.75 million in the guarantee proceedings the issue of the respondents' liability to the bank for anything in excess of that amount was collateral to the issues in the current proceedings and had never been litigated. Thus they submitted the applicant was not covered by the advocates' immunity from suit and in those circumstances, the judgment in the guarantee proceedings was not impugned.

11 The primary judge rejected this submission. He pointed out that the respondents did assert the judgment entered was not an accurate reflection of the measure of their liability to the bank. He described the respondents' case as "that they are entitled to damages ... because the judgment is wrong". He pointed out that this raised the spectre of disputed evidence about what transpired in the circumstances and events leading up to the entry of judgment and the respondents' anterior agreement to the consent order.

12 The preliminary conclusion of the primary judge was that the losses claimed by the respondents did not fall outside the scope of the advocates' immunity.

13 Notwithstanding, as I indicated, the primary judge declined to answer the question. His reasoning was as follows:

"[33] Notwithstanding all of the above, there remain at least two related matters that in my opinion are particularly troubling in this case, and which directly intersect with the way in which I am able to dispose of this application. The first matter is the apparent or potential strength of the plaintiffs' allegations that the defendants have been negligent. As I have already commented, the plaintiffs would have been substantially better off if they had simply not defended the proceedings. The predicament that the judgment created for them is difficult to explain but even more difficult to understand. It is also difficult not to have a sense of unease about the possibility that an egregious error may go without the prospect of a remedy.

[34] The second matter, however, is that it is not possible in a fair and reasoned way to assert the first without a proper inquiry. As was observed by Beazley and Giles JJ in Symonds v Vass [2009] NSWCA 139, the question of whether advocate's immunity applies in a given case cannot be determined without proper findings of negligence. Whether advocate's immunity applies depends upon a clear understanding of what occurred and of the respect or respects in which there was negligence, which is something that cannot and should not be determined on a hypothetical basis.

[35] I acknowledge that the orders made by Schmidt J for this issue to be determined as a separate matter were made by consent. I remain troubled, however, that it is not possible to form a concluded view about whether or not an examination of the plaintiffs' liability to the bank over and above their certified liability as guarantors of the company's obligations will or may 'identify issues which do not involve reagitation' of the judgment entered by consent by Rein J. I have been provided with an expansive statement of agreed facts for my purposes, but the allegations of negligence against the defendants cannot be usefully assessed or determined without considerably more material. Without being exhaustive I can well imagine that such extra material would necessarily include evidence from the plaintiffs with respect to their discussions with and instructions to the defendants, as well as the advice that they received, leading up to and concluding with the settlement."

14 The application for leave to appeal, which was heard as a concurrent hearing with the proposed appeal, thus raises three issues. First, whether leave to appeal should be granted. Second, whether the primary judge should have answered the separate question. Third, if so, whether the claim against the applicant fell within the scope of the advocates' immunity from suit. It was not contended that if the Court found in favour of the applicant on the second issue, the third issue should be remitted to the primary judge for his determination.

A preliminary matter

15 One difficulty which has arisen in the present case is that apart from his order that the costs of the hearing of the separate question be costs in the cause, the primary judge did not make a specific order declining to answer the separate question. However, the parties agreed that the order made by him should be treated as an order declining to answer the question.

Leave to appeal

16 As senior counsel for the respondents pointed out, referring to Adam P Brown Male Fashions Proprietary Limited v Philip Morris Incorporated (1981) 148 CLR 170 at 177, the appeal involved a matter of practice and procedure in respect of which particular caution should be exercised in granting leave to appeal. However, in the present case, for the reasons I have set out below, I am of the view that the decision of the primary judge was incorrect. Further, a refusal to answer the question leads to injustice to the applicant, exposing it to the costs and expense of litigation which would otherwise be avoided.

17 In these circumstances leave to appeal should be given.

Should the primary judge have answered the separate question?

18 The separate question was ordered under r 28.2 of the UCPR. The circumstances in which such an order should be made are well established. It is appropriate to exercise the power under the rule where there is a preliminary question of fact or law critical to the disposition of the proceedings, in the sense that if it is decided in one way it will necessarily dispose of them: Carl Zeiss Stiftung v Herbert Smith & Co [1969] 1 Ch 93 at 98. In CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601, it was stated by Kirby P at 606 that the procedure should not be adopted in respect of matters not ripe for determination. In that case it was stated by Kirby P at 606, that a matter is ripe for determination were it is a central issue between the parties and the resolution of the issue will either obviate the necessity for litigation altogether, or substantially narrow the field of controversy.

19 The question posed in this case fell within those categories. Both parties correctly acknowledged that an answer in favour of the applicant would finally dispose of the proceedings. Further, the relevant material to determine the question, namely the retainer and the breach said to have occurred, was agreed upon between the parties in the Agreed Facts. Subject to the matters raised by the primary judge, no other material was necessary to determine the issue. In addition, a determination of the advocates' immunity issue by way of a separate question would avoid potential re-litigation of issues raised between the bank and the first respondent in the guarantee proceedings. The central justification for advocates' immunity is the principle that controversies once resolved are not to be opened except in a few narrowly defined circumstances: D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 (D'Orta) at [45]. Dealing with the issue of the advocates' immunity as a separate question assists in the maintenance of this principle.

20 The primary judge gave two reasons for declining to answer the question. The first was unease that an egregious error may go without remedy. However, the operation of the advocates' immunity does not depend on the degree of negligence involved. The public interest in the finality of litigation has been held to outweigh consequences to the aggrieved litigant of letting a wrong go without a remedy: D'Orta at [71]-[73].

21 The second reason given by the primary judge was that it was not possible to consider the first matter raised by him without a full and proper inquiry. In that context the primary judge referred to the decision of this Court in Symonds v Vass [2009] NSWCA 139; (2009) 257 ALR 689 (Symonds).

22 Symonds concerned a claim for negligence by the appellants against respondent solicitors, consequent upon the respondent acting for the appellants in a claim against a valuer. It was alleged by the appellants that various acts and omissions by the respondent solicitors in conducting the claim against the valuer led to the loss of an opportunity to obtain a better result in those proceedings. There was also a cross-appeal relating to an award for damages in favour of the appellants for what was described as delay and disruption in the proceedings against the valuer.

23 All members of the Court agreed that the primary judge had erred in reaching his conclusions on both the matters the subject of the appeal and the cross-appeal. Ipp JA would have dismissed the appeal and allowed the cross-appeal on the basis that the solicitors were immune from suit. The majority, Beazley JA (as her Honour then was) and Giles JA, ordered a new trial but for different reasons.

24 Beazley JA considered at [5] that it was uncertain that the advocates' immunity extended to an omission because of a negligent failure of a practitioner to bring his or her mind to a particular matter. Her Honour in the circumstances considered at [8] that there should be a new trial so that the "proper findings of negligence" could be made. Giles JA on the other hand expressed the view at [26] that the advocates' immunity would apply to a negligent omission. However, he concluded that there was insufficient material to determine whether the breaches fell within the scope of the advocates' immunity. He stated that it may not be easy to see a clear line between work done prior to the commencement of proceedings, such as advice on prospects of success or appropriate defendants and causes of action, and the conduct of the proceedings. He stated at [40] that deciding the application of the advocates' immunity requires a clear understanding of what occurred and clear findings of the respect in which there was negligence on the part of the lawyer.

25 Notwithstanding the doubts expressed by Beazley JA, it is now clear that the advocates' immunity can extend to a negligent omission. As Beazley JA herself pointed out in Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585 (Attard) at [2], it is settled that the advocates' immunity extends to an omission: see also Giles JA at [9] and Donnellan v Woodland [2012] NSWCA 433 (Donnellan v Woodland) at [198] per Beazley JA, Hoeben JA and Sackville AJA agreeing.

26 It is correct, as Giles JA pointed out in Symonds, that it is necessary to identify the breach which occurred as a precondition to considering the application of the advocates' immunity: see also D'Orta at [65]. In the present case the breaches were set out in both the Amended Statement of Claim and the Agreed Facts. The matter thus did not fall to be determined on what Giles JA described at [42] as a "notional demurrer", but rather as a separate question on agreed facts, a well established means of resolving such an issue: see Bass v Permanent Trustee Company Limited [1999] HCA 9; (1999) 198 CLR 334 at [50]-[52].

27 The respondents also submitted that the approach adopted by the primary judge derived support from statements made by Beazley JA in Donnellan v Woodland at [6]-[9] and by the Court of Appeal of Western Australia in Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85 (Alpine Holdings) at [91]-[92] that it was not always appropriate to determine the issue by way of separate question. In the former case Beazley JA expressed the view at [9] that the correct approach depended on the circumstances of the particular case. However, where the breach is set out clearly in the pleadings and in the facts agreed upon for the purpose of the separate question, there is no reason not to determine the issue in advance of other issues in the proceedings.

28 Alpine Holdings was an appeal from an order striking out a claim on the basis of the advocates' immunity. It was held it was arguable the advocates' immunity did not apply. The decision in those circumstances provides no assistance in determining the approach which should have been adopted to the separate question in the present case.

29 The respondents also sought to rely on the statement by Basten JA in Bott v Carter [2012] NSWCA 89 (Bott) at [33] that the issue which arises (in a case involving advocates' immunity) is the extent to which issues can be identified which do not involve re-agitation of the earlier proceedings. They submitted that this was the reason the primary judge was correct in saying that a further investigation may identify issues which do not involve re-agitation (primary judgment at [35]). However, there can be no basis for a further investigation in circumstances where the breach is defined clearly and agreed upon and the only question is whether any liability for the breach falls within the scope of the advocates' immunity.

30 In these circumstances the primary judge erred in declining to answer the separate question. As the respondents pointed out, the primary judge was entitled to control the manner of disposal of the proceedings before him: Landsal Pty Ltd (In liquidation) v REI Building Society, now the Co-operative Building Society of South Australia [1993] FCA 121; (1993) 41 FCR 421. However his refusal to answer the separate question ordered under r 28 of the UCPR for reasons which were irrelevant to its disposal constituted appellable error in respect of which this Court is entitled to intervene.

31 In reaching this conclusion I should not be taken as saying that in every case the question of advocates' immunity is one which should be decided as a preliminary matter, whether by way of an application to strike out the Statement of Claim or as a separate question. Despite the reasons given by Basten JA in Donnellan v Woodland at [259]-[260], that it is desirable to deal with the question in that fashion (having regard to the public interest in finality of litigation referred to in D'Orta as the justification for advocates' immunity), there will be cases when it is inappropriate to do so. Without being exhaustive, these cases may involve disputes as to the extent of the retainer, cases where multiple breaches of the retainer are alleged with some but not others falling within the scope of the advocates' immunity and cases where it is not clear that the breach complained of falls within or outside the scope of such immunity. In such cases it will be for the trial judge to determine how to proceed having regard to the principles set out in ss 56 to 58 of the Civil Procedure Act 2005 (NSW).

32 However, in the present case for the reasons set out above, the primary judge erred in declining to answer the separate question.

Does the claim fall within the scope of the advocates' immunity?

33 The respondents submitted that the claim fell outside the scope of the advocates' immunity. They submitted that finality is the rationale for the advocates' immunity, stating that the correct approach to the question is to identify the controversy which has been quelled and to determine whether the second set of proceedings infringes the principle of finality.

34 The respondents referred to the cases identified by McHugh J in D'Orta at [156] as falling outside the advocates' immunity, namely, failure to advise of possible actions against third parties (Saif Ali v Sydney Mitchell & Co [1980] AC 198 (Saif Ali)), failure to advise commencing proceedings in a particular jurisdiction (MacRae v Stevens (1996) Aust Torts Reports 81-405 (MacRae)) and negligent compromise of appeal proceedings leading to loss of benefits obtained at first instance (Donellan v Watson (1990) 21 NSWLR 335 (Donellan v Watson)). The respondents submitted that the rationale for these cases was that they did not involve any offence to finality at all as the controversy in the initial judgment was not sought to be impeached.

35 The respondents submitted that the present case did not call the initial judgment into question. They submitted that the judgment was relied upon to prove the loss and therefore the case did not involve re-litigation of the original proceedings. In making that submission senior counsel for the respondents placed reliance on what was said by Basten JA in Bott at [23]:

"[23] A similar reconsideration of basic principle has been undertaken in Australia, but with the result that the doctrine of the advocate's immunity has been retained: D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1. However, the justification is now soundly rooted in a principled approach to the fundamental need in the administration of justice for finality of judicial determination, subject only to constitutional requirements found in the entrenched supervisory jurisdiction of the High Court and State Supreme Courts and statutory provisions for appellate or other forms of review. Those roots (which also form the basis of at least one aspect of abuse of process) will inform the scope of the rule, in particular in relation to pre-trial activities and omissions. The scope of the immunity is no longer to be determined by differences in language but by the tendency of the claim to result in re-litigation of a controversy which has been quelled."

36 In D'Orta the plurality stated at [86] that there was no reason to depart from the test for advocates' immunity, described in Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 (Giannarelli) at 560, as extending to work done in court or work done out of court which leads to a decision affecting the conduct of the case in court. They did not consider there was any difference in stating the latter part of the test as work "intimately connected with work" in court.

37 In the present case, in my opinion, the work fell within categories of work done out of court affecting the conduct of the case in court. The alleged breach occurred in advising on settlement of the guarantee proceedings during the luncheon adjournment on the first day of the hearing and more importantly on the evening of that day. The Agreed Facts also state that the consent order the first respondent and Ms Lord were advised to sign were signed on that evening and submitted to the Court on the following day.

38 The advice thus led to the case being settled. Put another way it was intimately connected with the conduct of the guarantee proceedings.

39 This conclusion is consistent with authority: Biggar v McLeod [1978] 2 NZLR 9 at 12 and 13, Chamberlain v Ormsby t/as Ormsby Flower [2005] NSWCA 454 at [120] per Tobias JA and Donnellan v Woodland at [223].

40 The position is not affected by what was said by Basten JA in Bott at [23]. First, it was made clear in D'Orta that the test remains that stated in Giannarelli although the justification is finality of litigation: D'Orta at [46] and Attard at [8] per Giles JA, Beazley JA agreeing. I do not think in Bott Basten JA was propounding a different test as distinct from making it clear that in cases where it is uncertain that the advocates' immunity applies, consideration of that issue will be informed by its justification.

41 Second, the current proceedings do involve a re-agitation of the issues raised in the earlier litigation. It is fundamental to the claim that the judgment entered was wrong and the incorrect result was due to the negligence of the applicant. This necessarily involves consideration of the issues raised in the earlier litigation to determine whether in fact the applicant's advice was negligent. In that sense it offends against the principle of finality of litigation.

42 Nor do the cases referred to by McHugh J in D'Orta, as examples of cases where the advocates' immunity did not apply, provide any assistance to the respondents. MacRae involved a failure to advise to bring proceedings in a particular jurisdiction. It was held not to be work affecting the conduct of the case in court. It is quite different to the present case where the advice led directly to the settlement of ongoing proceedings.

43 Similarly Saif Ali involved a failure to sue a particular person. The House of Lords, applying the test suggested by McCarthy P in Rees v Sinclair [1974] 1 NZLR 180 at 187 (that for the advocates' immunity to apply work done out of court must be intimately connected with the conduct of the case in court), held that the claim was not covered by the advocates' immunity. By contrast the present case, involving advice on settlement during the course of the proceedings, was intimately connected with those proceedings.

44 Donellan v Watson was an unusual case. A solicitor's agent consented to orders settling an appeal contrary to the express instructions of his principal and of the client as to how to settle the proceedings. The settlement effectively deprived the client of benefits obtained at first instance. Mahoney JA held at 337 that there was no collateral attack on the order and held there was thus no advocates' immunity. Importantly however, his Honour also stated at 338 that ordinarily, compromise, even if the consensus be reached out of court, is within the advocates' immunity. He said by contrast the case before him involved negligence in failing to carry an authorised compromise into effect. Waddell AJA agreed with Mahoney JA.

45 Handley JA on the other hand decided the case on the basis that the agent was liable for acting in excess of authority which nevertheless bound the principal. On that approach in his Honour's view, the question of the advocates' immunity did not arise.

46 Donellan v Watson was decided before the decision of the High Court in D'Orta. It is not necessary, however, to determine whether the decision was correct. Importantly, as Mahoney JA accepted, a consensus reached out of court is generally within the advocates' immunity. The settlement in the present case was within the authority of the applicant. The application of the advocates' immunity in those circumstances is not inconsistent with what was decided in Donellan v Watson.

47 For these reasons in my opinion, the applicant is immune from suit in respect of the claim made against it.

Conclusion

48 In the result, leave to appeal should be granted and the appeal allowed. I make the following orders:

(1) Grant the applicant leave to appeal.

(2) Direct the applicant to file a notice of appeal in the form of the draft amended notice of appeal contained in the application book amended to seek orders setting aside the orders of the primary judge made on 17 October 2013.

(3) Order that the separate question of whether the plaintiffs' claim is defeated entirely, because the defendants are immune from suit be answered as follows: The advocate's immunity from suit is a complete answer to the claim made by the plaintiffs.

(4) Order that judgment be entered for the applicant in the proceedings.

(5) Order the respondents pay the applicant's costs of the proceedings in this Court and the Court below but have a certificate under the Suitors' Fund Act 1951 (NSW) if eligible.

49 MEAGHER JA: I agree, for the reasons given by the Chief Justice, that leave to appeal should be granted and the appeal allowed. I also agree with the remaining orders that his Honour proposes.

50 WARD JA: I agree with Bathurst CJ.

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Decision last updated: 01 October 2014